🇺🇸United States

Distorted trading and investment decisions due to unequal access to high‑quality market data

3 verified sources

Definition

The SEC and academic commentary emphasize that proprietary feeds provide a "faster and deeper picture" of markets than consolidated data, and that only firms that can afford these feeds can access this view.[2][5] This unequal access can lead to sub‑optimal routing and execution decisions by participants relying solely on slower or less rich data, effectively paying more or receiving worse prices than those with premium feeds.

Key Findings

  • Financial Impact: For investors and brokers without premium data, the implicit cost appears as worse execution quality and opportunity cost rather than a line item; across the market, this translates into persistent slippage and missed price improvement that regulators view as significant enough to warrant structural rule changes.[2][9]
  • Frequency: Intraday, continuously (every time orders are routed or executed based on incomplete data)
  • Root Cause: Two‑tier market data ecosystem where exchanges sell faster proprietary feeds in addition to core consolidated data, combined with high fees that limit who can afford the best information.[2][5][9]

Why This Matters

This pain point represents a significant opportunity for B2B solutions targeting Securities and Commodity Exchanges.

Affected Stakeholders

Retail investors and brokers, Small and mid‑size asset managers, Execution desks without full prop feed coverage, Regulators evaluating best execution and fairness

Deep Analysis (Premium)

Financial Impact

$10M-$50M annually in cumulative slippage and missed arbitrage opportunities for active proprietary trading operations • $1M-$3M annually in undetected market abuse, regulatory fines for missed violations, and reputational risk; potential SEC enforcement action for inadequate surveillance infrastructure • $1M-$5M annually in foregone data licensing revenue; lost market share to competing exchanges that offer better retail-platform data tier pricing; reduced stickiness of retail broker customer base

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Current Workarounds

Combination of delayed SIP data, analyst research calls, and manual monitoring of news feeds; larger orders executed via algorithmic trading with conservative slippage assumptions • Limited market data tier offerings; bundling of standard data with platform access; informal discussions with retail brokers on willingness-to-pay; monitoring of competitor pricing; Excel models of revenue scenarios • Manual back-testing of execution quality; comparative analysis via spreadsheets against known benchmarks; documentation of execution policies without systematic measurement; legal memos explaining data limitations; informal discussions with compliance consultants

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Methodology & Sources

Data collected via OSINT from regulatory filings, industry audits, and verified case studies.

Evidence Sources:

Related Business Risks

Under‑licensed and under‑reported market data usage causing recurring revenue leakage

Low- to mid-single digit % of addressable market data revenue; for a large exchange with $500M+ annual data revenues, this implies several million dollars per year in lost billings.

Overspending on proprietary feeds and connectivity far above cost to provide

For an active broker or trading firm purchasing multiple prop feeds and high‑performance connectivity, this can run into several million dollars per year in avoidable spend compared with cost‑reflective pricing.[4]

Complex fee and licensing structures driving billing disputes and rework

Six‑figure annual internal cost for larger exchanges and major clients due to staff time on corrections, disputes, and legal review; foregone collections or write‑offs from disputed invoices can add further losses.[3][6]

Delayed collections from disputed and manually reconciled market data invoices

For a data business with tens or hundreds of millions in annual billings, even a 15–30 day extension in collection cycles represents material working capital drag, often in the multi‑million‑dollar equivalent of tied‑up cash at any time.

Innovation and trading capacity constrained by high and rigid data licensing costs

Lost incremental trading, order flow, and listing activity is not precisely quantified, but the report indicates that exchanges have maintained overall equity market revenues despite lower trading volumes by charging higher prices to fewer participants, implying foregone growth in both trading and data revenue.[3]

Regulatory challenges and rule changes tied to conflicts of interest in market data sales

Multi‑million‑dollar legal and regulatory engagement costs across major U.S. exchanges over several years, plus revenue risk from mandated changes to data infrastructure and potential fee reductions.[2][9]

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